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Election year ‘heat’ burns Medicare cuts

September 1, 2008
by Bob Gatty
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There is nothing like the pressure that comes from the election season to encourage politicians and those bureaucrats who must answer to them to pay attention to sense and reason.

For months, the Alliance for Quality Nursing Home Care and the American Health Care Association (AHCA) tried to convince the Centers for Medicare & Medicaid Services (CMS) that its plan to cut nursing home payments by $770 million in fiscal year 2009 to compensate for a miscalculation by the agency was unfair and would be harmful, ultimately, to patients and their caregivers. Those arguments seemed to be falling on deaf ears as the agency appeared determined to move forward with its cuts. But the Alliance and AHCA refused to take “no” for an answer and went to work generating support on Capitol Hill. On July 28, the two groups announced that Sen. Roger Wicker (R-Miss.) had sent a letter to the White House objecting to the cuts, making him the 47th U.S. senator to weigh in on the matter in the previous four weeks. “The fact that the lawmakers with the most challenging re-elections are imploring the administration to forego this hurtful Medicare regulation underscores the significance of this robust opposition,” said Bruce Yarwood, AHCA president and CEO.

Alan G. Rosenbloom, president of the Alliance, said the strong opposition was based upon “the stark fact that local seniors' healthcare needs will be compromised by a regulation that will have a significantly negative impact on lawmakers' elderly constituents.” That, of course, could result in a negative impact on the lawmakers themselves as seniors tend to be dedicated voters. Rosenbloom added, “The scope and breadth of this congressional opposition—particularly among key members of the President's own party—is striking, and demonstrates they have objectively evaluated the facts, and how these cuts will undermine the needs of their elderly constituents.”

The GOP senators who either signed or sent letters to Health and Human Services (HHS) Secretary Mike Leavitt or White House Chief of Staff Josh Bolten were Sens. Coleman, Roberts, Dole, Collins, Burr, Chambliss, Sununu, Snowe, Crapo, Isakson, Specter, Alexander, Warner, Wicker, and Cochran. Democratic senators expressing their opposition were Conrad, Wyden, Stabenow, Lincoln, Akaka, Cardin, Murray, Mikulski, Dorgan, Casey, Leahy, Cantwell, Ben Nelson, Levin, Menendez, Salazar, Inouye, Klobuchar, Prior, Dodd, Whitehouse, Lautenberg, Reed, Johnson, Webb, Harkin, and Rockefeller. Independents Joe Lieberman and Bernard Sanders are also on record opposing the cuts.

And so it came to pass that on July 31, CMS announced that Medicare payment rates to nursing homes will increase by $780 million next year as a result of a 3.4% increase in the annual market basket calculation of the cost of goods and services included in a skilled nursing facility (SNF) stay. CMS said “a recalibration of the payment categories, intended to correct a previous error which had been proposed for fiscal year 2009, has been delayed while CMS continues to evaluate the data.” The proposed rule announcing the planned “recalibration,” which would have resulted in the cuts, was published on May 4, 2008. “CMS is committed to providing high-quality care to those in skilled nursing facilities and to paying those facilities properly for that care,” said Acting CMS Administrator Kerry Weems. “However, in view of the widespread industry concern that a recalibration could potentially have adverse effects on beneficiaries, clinical staff, and the quality of SNF care, we will continue to evaluate the underlying data carefully as we consider implementing an adjustment in the future.”

The reality, of course, is that Weems, Leavitt, and other top political appointees at CMS and HHS will most likely be replaced in whatever new administration takes office next January—and most certainly if the new president is Democrat Barack Obama. So if that “recalibration evaluation” takes longer than the next three months, those cuts are, no doubt, history. Medicare pays SNFs based on a prospective payment system, which uses a resource classification known as Resource Utilization Groups (RUGs) to help determine a daily payment rate. The RUGs reflect a patient's severity of illness and the kind of service that a person requires—the “case-mix.” Each RUG group is assigned a case-mix weight showing the relative acuity of each RUG group within the overall system. In 2006, CMS refined the case-mix structure to account more accurately for the resources used in the care of medically complex patients. Nine new groups for beneficiaries requiring both therapy and extensive medical services were added, and an adjustment for nontherapy ancillary services was included. The payment rates were updated using estimated data that have formed the basis of CMS payments to SNFs since the beginning of 2006.

CMS said the expansion of the RUG model “was intended to be budget neutral, but actually resulted in increased Medicare expenditures.” Once actual utilization data under the expanded RUG model became available, CMS found that patients were being classified into one of the newly created RUG groups more than 30% of the time, compared to earlier projections of 19%, thus triggering higher Medicare payments than originally intended. So, in its May proposed rule, CMS proposed to change the RUGs to establish payment rates that “more accurately reflect the needs of patients.” However, in this final regulation, the agency says it will continue to evaluate the data and decide what action to take in the future.

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